New Bill in North Carolina Favors Banks, Burdens Bitcoin Business

Regulation can be a good thing when crafted fairly with all affected parties in mind. On the other hand, it can also be used as a tool to hinder growth and development of competing parties. Miles of paperwork and high entry costs can be implemented, which can dissuade those applying, potentially even stopping applicants before they leave the gate. New legislation being voted on in North Carolina points towards the latter, with the updated Money Transmitters Act putting bitcoin in the crosshairs.

The bill in question is HB 289, originally introduced in 2001. The proposed legislation is now being updated to include the vast technological advances of the past decade, such as cryptocurrency. Representative Stephen Ross is a primary sponsor on the bill, and when not busy with duties in government he holds the position of Vice President and Investment Officer for Wells Fargo Advisors. North Carolina has long been a stronghold of the banking industry, making this legislation particularly interesting. The long form title of the bill is almost poetic –

“AN ACT TO ENACT THE NORTH CAROLINA MONEY TRANSMITTERS ACT AS REQUESTED BY THE OFFICE OF THE NORTH CAROLINA COMMISSIONER OF BANKS.”
— – HB 289

Though things naturally need to be renewed after a decade of age, this bill appears to target the growth of cryptocurrencies as a whole – with bitcoin as the proverbial Moby Dick. Any party seeking to process payments would be required to pay $1500 for registration, as a money transmitter, and incur additional fees after an annual assessment. Bitcoin and other cryptocurrencies are officially designated as currency in this bill, and therefore conveniently fall under the blanket of regulation. This all seems strangely contradictory as the IRS has defined bitcoin as property rather than currency.

“As many of you have seen lately there have been things like Apple Pay and Google Wallet, or what we commonly refer to in the finance world as ‘virtual currency’.”
— – Representative Ross

The bill has received nearly unanimous support, with only one representative voting no. Debate on the matter lasted less than two minutes.

“HB 289 comes to us through the office of the North Carolina Commissioner of Banks,” Representative Ross explained. “What this bill does [is] simply [go] through the existing money transmitter act and revise the act to include the virtual currency world that is growing by leaps and bounds.” Not a single person spoke as Ross continued the debate, which could have easily been confused as a one-man rallying call for support.

“You may have heard the term bitcoin; bitcoin is obviously a virtual currency. It is one of the pieces of virtual currency that will become regulated under this act. The bill itself is non-controversial: it went through banking unanimous, it went through finance unanimous. There is no known opposition.”
— – Representative Ross

The lack of controversy is equal parts true and alarming. US Bitcoin exchange Coinbase doesn’t appear to have a problem with the bill, and they are the only bitcoin-related business registered as a Money Transmitter in North Carolina. They remain quiet due to the exemptions included in the bill, which would allow them to remain unscathed by fees and be grandfathered in.

If this legislation passes it would become effective on October 1st of this year, and the bar would then be raised for any business entering the bitcoin industry in North Carolina. It makes sense that Coinbase wouldn’t oppose this regulation.

After taking a step back and looking at the big picture it is easy to see why this bill is being attempted. In a state strongly influenced by the financial industry, which would benefit from bitcoin regulation, the invested parties are rather easy to spot. “The office of the Commissioner of Banks has worked on this bill for the better part of 2 years with stakeholders trying to get this exactly in the right form,” says Representative Ross towards the end of his monologue amongst a silent crowd.

This bill, though appearing to hinder bitcoin, could also inadvertently hurt job growth for the state. Cryptocurrency is a field that has seen a steep rise in investments over the past three years, and North Carolina would be lucky to receive any of the resulting jobs with regulation like this around the corner. Employment website Glassdoor even listed Raleigh as number one in a recent ‘25 Best Cities for Jobs’, as a result of a pro-job creation movement. HB 289 seems to be a sharp left turn from this path, especially considering the flourishing technology industry in the state.

Similar bitcoin-burdening regulation is being voted upon in California in the form of AB-1326, a much more conspicuous bill than it’s relative in North Carolina. Fees are steeper and the bar is far higher in the proposed California bill. It will be interesting to see how Coinbase reacts to AB-1326 since it affects the very state in which they reside. Thankfully resistance is being organized against AB-1326 by John Light, founder of PawnCoin. Though in a different location, the concerns he raises hold true for both states.

“Attempts to impose further restrictions on the purchase, sale, or use of bitcoin by private businesses and individuals would serve to limit access and prevent people from gaining the full range of benefits provided by this innovative technology.”
— – John Light, founder of PawnCoin